UK to Withdraw from Energy Charter Treaty
On 22 February 2024, Graham Stuart MP, UK Minister of State for Energy Security and Net Zero, announced that the UK would leave the Energy Charter Treaty (ECT), to support the government’s plans for a transition to net zero.
The UK withdrawal follows the failure to reach agreement between parties on a modernisation of the Treaty, which would have extended its provisions to low carbon investments such as Carbon Capture Storage and Use (CCUS) and hydrogen. This was rejected by 9 EU Member States, including France, Germany, Spain and the Netherlands, who also announced their intention to withdraw from the Treaty.
The Energy Charter Treaty was signed in Lisbon in 1994, and aimed to promote international energy investments, typically for past investors in fossil fuels, including in the former Soviet Union.
It has allowed such investors to sue governments that took actions or enacted policies that undercut the value of their investments, in controversial provisions on Investor-State Dispute Settlement.
The sight of fossil fuel companies bringing multi-million dollar lawsuits against governments seeking to engage in the energy transition has proved too much for some of the Treaty’s critics.
The UK withdrawal would take effect one year after deposit with the ECT Secretariat. However, there is a potential 20 year period after the withdrawal during which cases might still be brought under the Treaty for breach of its provisions.